Fears of corn shortage pit users against each other
The state’s largest livestock organization called Monday for a waiver on federally mandated ethanol production as a way to stretch out what could be a small 2012 corn crop.
“We have not had a corn belt drought since we initiated the mandate,” said Michael Kelsey of the Nebraska Cattlemen, “so we’re in uncharted territory. But it’s territory that can and probably could be very devastating to the livestock producer.”
The mandate, put in place in 2005, requires that an increasing percentage of highway fuel come from renewable sources. The 2012 level is 13.2 billion gallons.
It should be noted that the Cattlemen already were opposed to the mandate as a policy matter.
But Kelsey’s remarks reflect rapidly worsening cornfield conditions in several of the biggest producing states and increasing competition for bushels among corn buyers.
Despite Nebraska’s irrigation reputation, the portion of the crop rated good or excellent dropped again Monday from 47 to 43 percent and the poor and very poor categories rose from 20 percent to a combined 27 percent.
Meanwhile, counties approved for emergency haying and grazing of acres enrolled in the federal Conservation Reserve Program climbed from 18 to more than 50 in one week. That’s most of the western two thirds of the state.
And prices for corn and soybeans rose sharply again in futures trading and in cash offers from Lincoln area elevators.
The cash price for soybeans of more than $15.50 per bushel is more than $4 above the all-time record high marketing year of 2010-11, according to the U.S. Department of Agriculture.
As Kelsey spoke, the prices for fed cattle were headed in the other direction.
“So we’re already starting to see the cattle market being hammered by a corn market that, in our opinion, is responding to drought hinged on a government mandate, rather than responding to a market based on market principles.”
In arguing for a waiver from the Environmental Protection Agency, the federal ramrod on fuel standards, the Cattlemen put themselves at odds with spokesmen for the state’s ethanol industry, another key component in the state’s agricultural economy.
Confronted with high grain prices and comparatively low oil prices, several of the state’s two-dozen ethanol plants already are in idled status and others are operating below peak capacity.
Steve Sorum of the Nebraska Ethanol Board said both livestock producers and ethanol plants are facing adverse circumstances.
“But pitting one side against the other at this stage is counter-productive to Nebraska.”
John Campbell of AGP Grain Marketing in Omaha, owner of a Hastings ethanol plant, said any action by the EPA at this stage would be premature.
Nobody knows the outcome of the 2012 harvest at this stage, he said.
“Until we know what we’ve got -- which might not be until December -- I think it would be difficult to say, one way or the other, about the 2013 mandate.”
Even if a waiver on the ethanol mandate was issued quickly, it wouldn’t have much effect on the 2012 situation, Campbell said.
Brad Lubben, an agricultural policy analyst at the University of Nebraska-Lincoln, said the EPA won’t act without a scrutiny phase -- if it acts at all.
“It is an EPA decision,” Lubben said. “It does not require action of Congress.”
“(But) if I read the tea leaves properly, it’s actually a pretty drawn out process.”
Calling for cutbacks in corn exports is another strategy option that carries its own risks, Lubben added.
“We’re not in the business, I don’t think -- I hope not -- of trying to tear down international trade relationships over a little bit of price rationing.”
At the same time, he acknowledged a situation in which “we’re demanding more and more production every year” for feed, fuel and export.
The cattle sector already is feeling the effects of widespread drought last year on grazing in Texas and other states south of Nebraska. That led to heavy culling of cows, herd liquidations and higher prices for replacement animals in feedlots.
“We’re looking at some rather tremendous shocks to the current market fundamentals," Lubben said. "And that leaves us with quite a bit of uncertainty.”
Reach Art Hovey at 402-473-7223 or at ahovey@journalstar.com
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